Monday, July 04, 2011

We Got Trouble in River City: Ameresco, The Music Man, and the Portsmouth Boys

George P. Sakellaris, Founder and CEO of Ameresco

Established in 2000, Ameresco is an energy conservation company that grew rapidly in its first six years or so by aggressively marketing its energy saving services to customers in both the private and public sector, to schools and hospitals, to businesses and municipalities both large and small, to everyone, that is, who could profit from the more efficient use of whatever kinds of energy they were consuming. Ameresco arrived on the corporate scene just as the Enron Corporation, much of whose business was in gas and electricity, was about to implode ignominiously. Profiting from massive fraud and deception, Enron had grown steadily in the second half of the twentieth century when most Americans consumed much more than they conserved. Ameresco’s growth, by contrast, occurred at the beginning of the new millennium, by which time the conservation rather than the consumption of energy was becoming a big business. Energy conservation became a crusade not just for those in the private sector, such as Ameresco, but for government as well, at the local, state, and national levels. Wearing its green hat, like the Jolly Green Giant, Ameresco cooperated with public bodies and agencies on behalf of conservation. Instead “Keep America green, bring money,” Ameresco’s slogan, referring to energy, is “Green, Clean, and Sustainable.” But for some brands, such as Salem Cigarettes, green has become a racket. “Think Clean Keep it Green” is the slogan on the green colored package of Salems, a leading cause of preventable deaths in the United States.

The founder and CEO of Ameresco is the sixtyish Greek immigrant George P. Sakellaris, who said of himself, on Linked In, “I am a hands on leader, and I bring the same professionalism and enthusiasm to every project.” His biography, or what we know of it, reads like the typical Horatio Alger American success story. “I have won many prestigious awards,” Sakellaris wrote. Among those prestigious awards was his 1999 Horatio Alger Award for Distinguished Americans. In the lexicon of American mythology, the name Horatio Alger is synonymous with success. But the prospects for Ameresco and for the field of energy conservation in general are not nearly as promising as they were before the Great Recession that began in late 2007. Ameresco’s Initial Public Offering, in 2010, which had the aim of raising money for its expansion and for servicing its debt, was lackluster. The disappointing response to Ameresco’s IPO could be a harbinger of hard times ahead, not just for Ameresco but for the whole energy conservation industry. The bloom may be off the green rose. When Ameresco’s first quarter earnings were released a few months ago, resulting in a stock market dip, Mr. Sakellaris ignored his company’s policy of not commenting publicy on fluctuations in its stock and hastened to CNBC to nervously explain that first quarter returns were normally the lowest of the four quarters for his company. So the 3.5% profit the quarter was nothing to worry about. He told CNBC, “Market Trends are very, very good.” His underlying message appeared to be, “Don’t Panic!” But if he doesn’t look panicked on that interview, he does look nervous, and maybe he has reason to be.

Ameresco’s Poor Report Card in Portsmouth

In regard to promises made and not kept, Ameresco has a poor report card in Portsmouth. Cynics might see a passing resemblance between Ameresco’s CEO and Harold Hill the traveling salesman in The Music Man, who came to the fictional River City, Iowa, shortly before July 4th, in 1912, to take advantage of its unsophisticated citizenry. (Watch “Ya Got Trouble Right Here In River City” by clicking here.) Though he prides himself on being a “hands-on” CEO, Sakellaris did not himself come to Portsmouth. Ameresco grew too fast for him, headquartered in Massachusetts, to have his feet everywhere and his hands on everything. But his Midwestern representative, Jeff Metcalf, out of Indianapolis, was very much “hands-on” in Portsmouth. It was standard operating procedure for Harold Hill in his sales pitch to promise more than he could deliver. That’s what Mefcalf has been accused of having done in the Ohio river city of Portsmouth: promised more than he delivered.

At the 13 November 2006 meeting of the Portsmouth City Council, Metcalf promised, according to the minutes, that “every meter in the City will be installed within a year.” Four years later, in a 24 March 2010 memo to Mayor Jane Murray, Patricia Williams, the city’s Public Utilities Computer Programmer, listed eight ways in which Ameresco had not lived up to its promises to Portsmouth, including Metcalf’s that the meters would be installed within a year. Williams wrote in the memo, (1)“We have changed over 500 meters that were supposed to have already been changed by Ameresco and were not.” She explained that the city had to pay city workers overtime to change the five hundred meters that Ameresco workers, four years later, had failed to install. Not only that, city workers found new uninstalled meters lying in pits next to the unremoved old meters. (2)Ameresco workers sometimes mixed up which meters went with which address, resulting in confusion and loss of revenue. (3)“Meters were put into pits at vacant lots and inactive accounts. We have brand new meters sitting in pits of vacated homes that will never be used unless we come upon them and pulled them to be used somewhere else.” (4)“We have lids that have not been drilled and meter transceiver units mounted [im]properly (too numerous to mention). ” (5)The workers who were hired by Ameresco were supposed to be certified plumbers and apprentices, but “[t]he people they hired were heating and air conditioning people who had no experience in this field.” (6)“Multiple repairs had to be made to various customers’ lines and property due to the fact of inexperienced people changing meters.” (7)“Inaccuracies in paperwork caused many billing nightmares. It took considerable time to correct inaccurate meter numbers and reads to make sure the customers were charged accurately.” (8)“We have changed 139 meters to date and many more need to be changed because they have already become non-registering. This causes loss of revenue not to mention the cost of ordering new registering.” Williams ended her damning memorandum with the comment, “In closing, I would not give Ameresco any good references.” (Williams’ memo can be found on Teresa Mollette’s Portsmouthcitizens website by clicking here.)

I don’t think Jane Murray will be giving any good references for Ameresco either. In an email to me (2 July 2011), she wrote, “[T]he Ameresco deal is about as preposterous as the financial instrument used for repayment. This called for a nearly $1 Million debt payment per year for 10 years. This decision was made at the same time that more than 60 homes were inundated with sewage thanks to the lack of public policy and code enforcement from the city, resulting in major storm water runoff problems from development at SOMC, Hillview, and others.” Murray went on to explain, “The Ameresco deal essentially was to pay nearly $9.5 Million to have a company replace water meters, light bulbs, street lights, traffic lights, and windows. Director of the Water Department, Sam Sutherland told me that the whole thing was a disaster and that he pleaded with Jim Kalb over and over to not do the deal.” But the deal was done and Murray inherited a looming financial disaster. She is not the only one in Portsmouth who thinks the Ameresco deal was a disaster.

The Ameresco Contract: “A Horrible, Disastrous Investment”

The dim-witted Portsmouth Mayor signs Ameresco Contract

When the traveling salesman of Ameresco began making visits to Portsmouth around 2005, peddling energy conservation services, he found a number of easily bamboozled Portsmouth Boys in public office, including the aforementioned Jim Kalb, the dim-witted Portsmouth mayor. The Portsmouth Boys fell for the Ameresco sales pitch hook, line, and meter. Three different witnesses have told me that after the meeting at which the city council had voted in favor of the contract, Ameresco representatives had whooped it up in the parking lot outside the Municipal Building as if they had just bought Manhattan from the Indians for $24 dollars. As a result, Portsmouth city government, which was getting by financially only by juggling accounts and cooking the books, is now in precarious financial straits and is trying to increase the city income tax to bail itself out. Like the little boy in Hans Christian Andersen’s “The Emperor’s New Clothes,” First Ward councilman Kevin Johnson has pointed out in an email to his colleagues in city government that Portsmouth is, as a result of Ameresco’s broken promises, if not buck naked, down financially to its last fig leaf. (Johnson is not a Portsmouth Boy and he was not on city council when Kalb signed the Ameresco contract.) The expensive services and equipment that Ameresco promised—the equivalent of the musical instruments and the uniforms Hill promised in The Music Man—do not appear to be paying for themselves over time, as Ameresco had promised. According to Johnson, that promise has not been and is not likely to be fulfilled. “From a business perspective,” he wrote in his email, “I am most concerned as to how the $647,625 in ‘claimed’ savings for one year compares to the $940,000 payments the City of Portsmouth must make to BankAmerica each of ten years. . . . Even if these ‘claimed’ savings are real and stay the same for the foreseeable future,” he continued, “it will take the City 14.5 years to recoup its investment—at which time, if not before, much of this equipment will need [to] be repaired or replaced—therefore ending up as a horrible, disastrous investment by the City of Portsmouth” (emphasis added). On CNBC, Sakellaris said there was no cost to his customers, that Ameresco contracts were “revenue neutral,” because the energy savings the customers would make over the period of the contract would pay for the loans the customers got from third parties. In the case of Portsmouth the third party was the Bank of America. If a contract turned out not to be revenue neutral, Ameresco “guarantees” to make up the difference to the customer. We shall see what we shall see.

The American Dream or the American Nightmare?

George Sakellaris was a Horatio Alger Award winner in 1999, but so was Enron’s CEO Kenneth Lay the year before—just prior to Enron’s unraveling. Lay was subsequently convicted of securities fraud. Ameresco is located in Framingham, Massachusetts, not Houston, Texas, and Portsmouth is a real river city in Ohio, not a fictional one in Iowa, but that did not stop the Portsmouth Boys from buying $9.4 million dollars worth of trombones, in a manner of speaking. The Music Man ends with a miracle when the boys of River City, Iowa, learn overnight to play the instruments, and Harold Hill, after falling in love with a music teacher, sees the light. In real life miracles don’t happen. That’s why we have Hollywood. The workers Ameresco hired never did learn how to install the meters. By the standards of the Horatio Alger myth, Horatio Alger, the son of a minister, was an abysmal failure for it was finally revealed a hundred years or so after it happened that he was a minister who had fled to New York after it was discovered that he been sodomizing boys in his Cape Cod parish. Instead of being obsessed with the American virtue of making money, Horatio Alger, like the ancient Greeks he admired, was obsessed with boys. In his obsession with boys, which he sublimated in his fiction, Alger neglected almost everything else. In 1899, when he died, he was practically broke. Are the Portsmouth Boys, after having been seduced by a traveling salesman, leaving the taxpayers of Portsmouth pregnant and barefoot? After she was recalled from office, Jane Murray started a blog, WeGotTroubleRightHereInRiverCity. I wonder why she named it that?

What does our current unelected Uncle Tom mayor say about Ameresco? “We still have our yearly payment that we pay to Bank of America,” David Malone told the Portsmouth Daily Times (10 May 2011). “But the project is still going,” he reassured the public. “Ameresco is still doing their part in the project contract. As far as I know everything is going along real well.” As far as he knows everything is going along real well? What Malone knows about budgets and spreadsheets, and about finances in general, is so minuscule that even a molecule of H2O would dwarf it. If he had been the mayor who negotiated the Ameresco contract, instead of a mere cheer-leading, mayor-in-waiting councilman, God knows where the city would be now. I am expressing only my opinion, a right afforded me under the free speech provisions of the Constitution, but I think the lesson to be learned from this Ameresco business, at least where Portsmouth is concerned, may be to beware of Greeks bearing gifts, even if they are wrapped in recycled green paper. The financial fireworks ahead for the city of Portsmouth, partly the result of Ameresco’s apparently broken promises, may make the fireworks on the Ohio River this Fourth of July look like sparklers.

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About Me

Retired now, I was born in Boston, Massachusetts, hold B.A. and M.A. degrees in English from Wesleyan U. (Conn.) and a Ph.D. in American Studies from Yale, where I was a Research Associate at the Institute for Social and Policy Studies and a coordinator of a committee that organized international American Studies conferences during the American Bicentennial. From 1989-2006, I taught English at Shawnee State U., in Portsmouth, Ohio, where I was active in the faculty union, the Shawnee Education Association, serving four terms as president. I also served as faculty advisor to the student gay and lesbian group. I have served also as president of the Concerned Citizens of Portmouth and Scioto County, a community action group.
My scholarly interests have focused on the American Dream: the Myth and the Realities.
I can be reached at rforr1@roadrunner.com
A selection of my poems can be found at http://xpalidosis.blogspot.com The original contents of all blogs on this site are copyrighted @.